A Web Site Built For Bricks And Mortar

When insurance carriers talk about an insurance-sellingprogram designed around "bricks and clicks," it usually implies that services are offered both offline and online.While this remains the primary application, Baltimore-based Zurich North America Small Business has taken the concept in a different direction. Through development of its Buildersrisk.com Web site, the global insurance giant provides "clicks" that literally insure "bricks."

Buildersrisk.com made its debut in October 2001 with one major objective in mind: provide a wide range of builders risk insurance products to meet the diverse insurance needs of residential and commercial construction contractors.

Previously offered only to Zurich North America's small-business agents, the program is now available to any licensed property and casualty independent agent in the United States. Registered agents can access www.Buildersrisk.com around the clock to rate, quote and issue a policy.

And when they do participate, a writing agent discovers that the coverage terms are multidimensional. A contractor that applies for a builders risk policy through Zurich's branded Builders Risk Plan program is provided with protection for materials both in-transit and at temporary locations; coverage for materials either installed or uninstalled; and coverage for losses due to local ordinances or laws.

They can also secure coverage for theft of materials from the moment they're delivered to the job site. To deter theft of materials in the first place, the Zurich policy offers a Job Site Safety program with a $10,000 reward for information leading to the arrest and conviction of persons committing theft, vandalism or arson on the job site.

Tremendous asset

To many of the independent agents, these terms and conditions of the program have quickly made them believers. "It's proven to be a tremendous asset to our business because the system cuts to the chase with not only instant, but very accurate and precise quotes," says Fred Lautenbach, president of Lautenbach Insurance, a Littleton, Colo.-based insurance agency that specializes in commercial builders risk insurance. "These attributes are very important because in our business, a contractor sometimes calls us in a panic for a building risk policy just prior to breaking ground."

Zurich has actually offered builders risk insurance for more than 20 years, but for the majority of that time products were bought and sold offline.

But over the past few years, the builders risk insurance market has undergone changes that made Zurich rethink its marketing and distribution approach. A handful of coverage providers have begun to limit the amount of property business they write. As a result, many agents have witnessed a tightening in the property market.

Recognizing an opportunity, Zurich responded with a comprehensive program that also had the power of a Web-based environment.

First, the product line-offline or online-had to be distinct. Zurich's basic program provides coverage for residential and commercial structures with estimated completed values up to $3 million, subject to certain underwriting guidelines and restrictions. The plan is regarded as flexible in that service representatives and underwriters are available to assist with coverage for structures that fall outside of these general guidelines.

Builders must have two years experience unless otherwise qualified, while three years experience is required when requesting coverage for commercial structures with total estimated completed values greater than $3 million. The catastrophic limit is $5 million per policy, and a policy can be issued in the name of the homeowner/mortgagee if the builder qualifies.

A builders risk product of this caliber appealed to Lautenbach, who says he also gravitated toward it because it was available on the Web.

From CIS to ZIS

Originally, the provider, while a business partner of Zurich, operated under the name Construction Insurance Services. But in an effort to leverage off the powerful brand equity Zurich offered, the unit dropped the "Construction" and wisely inserted Zurich.

ZIS is regarded as one of just a select few insurers that offer this type of coverage, says Alan Ferguson, senior vice president for Jacksonville, Fla.-based Zurich Insurance Services (ZIS). It's not only a niche makret, but a growing one as well.

The market for builders risk coverage-also known as Course of Construction-is picking up the pace, which provides a great deal of impetus to offer a comprehensive selling program.

The U.S. Census Bureau estimated that projected housing starts for 2002 to be 1.7 million, with projected expenditures for improvement/repairs at $168.5 billion. Builders risk coverage is known to offer more comprehensive coverage than a standard HO-3 (homeowners) policy.

Precision pricing

One of the advantages that Ferguson believes Zurich possesses in marketing this product is the precision of its rating process. With more than 20 years in writing this type of coverage, Zurich believes it understands the risk involved at a job site based on multiple criteria.

"When an application is submitted, writing agents find that only 15% to 18% of policies require any special intervention from an underwriter," says Ferguson. "The majority flow through the process and are automatically issued.

"When an agent needs to modify a proposal, they can e-mail an underwriter to communicate these changes," he says. "The system tells me if it's going to flow out or be returned to an underwriter due to various policy exceptions."

Zurich executives had a hunch that agencies such as Lautenbach's would find significant value in such a program. But the carrier was uncertain on how to best apprise agents of the program.

In 2001, Zurich launched a highly-targeted marketing campaign to agencies, augmented by both print and electronic direct mail.

The ZETA factor

Many of these targeted agencies were ones that have also adopted the Internet for conducting business, and would value the program's Web-centric positioning, Ferguson notes.

In fact, Zurich created a corporate initiative called ZETA, or Zurich's Ease Through Automation, which is intended to demonstrate Zurich's commitment to electronic efficiencies. ZETA is not exclusive to builders risk insurance, but all lines of coverage.

"Buildersrisk.com gives independent agents an entry into a new insurance market, and the ability to write our signature builders risk plan without being a contracted agent with us," Ferguson says. "Our goal in launching the site was to create a business model with an easy point-of-sale interface. Buildersrisk.com is the simplest way for an agent to access our product. Licensed agents can issue a policy over the Internet in less than five minutes within a six-step process."

To date the program has attracted more than 10,000 independent agents amassing 15,000 builders insurance applications. Ferguson notes that the agents that use Buildersrisk.com and become exposed to Zurich's products are regarded as prime candidates for a full contract with a Zurich business unit in the future.

Zurich plans to attract a greater number of independent agents to the Web site through targeted marketing campaigns and direct mail in the coming year. Next year, the insurer also plans to offer more services on the site, including online premium payments. It also hopes to double the number of independent agents using the site, to about 20,000.

The targeted marketing campaign is what alerted Lautenbach to the program, and he's glad he caught wind of it.

Lautenbach Insurance wrote its first builders risk policy through the Zurich Web site last May and since then has turned exclusively to Zurich for its needs in this market space. The agency, which specializes in providing coverage to small, commercial contractors, wrote $3 million in coverage last year, all lines included.

Sold on the program

There are three aspects of Builders-risk.com that Lautenbach values and have him sold on the program going forward.

One is the volume commitment Zurich requires-in short, there is none. This is appealing to a small agency that perhaps could not meet certain volume thresholds.

The second is that a basic policy is usually for one year rather than six months. "Often, I've provided contractors with coverage limited to a six-month period. This becomes problematic if a job that was expected to take five, six months to complete experiences scheduling overruns," Lautenbach says.

The third aspect that seals the deal is the power of ZETA. "It's very easy to log on and find coverage in one Web visit-you don't have to log onto one site for a commercial policy and go somewhere else for a residential quote," Lautenbach explains. "And the system is intuitive in that as you fill in information and answer various questions, the system makes assumptions based on data that's already been submitted. It pre-fills screens and greatly reduced the time spent processing an application."

Lautenbach estimates that it takes his support staff five minutes to issue a policy from beginning to end. "In the past, you would have to start the process, communicate with an underwriter and wait a week to a month to get a policy delivered. Now we enter it, get the price, invoice it and it's out the door in 10 minutes," he adds.